A former hedge fund manager and financial dissident gives his take on what ails the U.S. economy and why the Federal Reserve should be more, not less, irresponsible.
A public company has switched $250 million in cash reserves to bitcoin
The latest in the vaccine rumor trade with Vladimir Putin’s propaganda play
Hong Kongers use the stock market to protest
Our main conversation is with former hedge fund manager Hugh Hendry.
After a few years of focusing on a “volatility at the end of the world trade” in property development in St. Barth’s, the constant contrarian Hugh Hendry has returned to the macro world in a big way.
In this conversation, we discuss:
Why Hugh left macro, and why he came back
How he lost three years being angry at the Fed
How he came to be bullish on equities in 2012
How money managers become trapped by narratives
Why the Fed should actually be less, not more, conservative
The next bull market isn’t just about the bitcoin-dollar devaluation narrative but about decentralized finance providing a solid place to redeploy existing crypto capital.
The unlikely story of the world’s second-highest paid DJ, including a bet on anonymity, a viral billboard making fun of Instagram influencers, and a cultural cooking channel on YouTube.
Mainstream financial media loves reporting the stock market like it's the only economic indicator that matters. On this episode, NLW breaks down 11 numbers that together tell a much more complete story, including:
Dr. Selgin is a Senior Fellow and director of the Cato Institute's Center for Monetary and Financial Alternatives as well as Professor Emeritus of Economics at the University of Georgia.
In this eye-opening conversation, he and NLW go deep on the history, present and future of central banks, including:
Why the Scottish and Canadian banking systems in the 19th century show that central banks aren’t a prerequisite for stability
Why the U.S. “free banking” system wasn’t free at all
Why the instability in the late 19th century U.S. banking system was caused by regulation, not the lack of a Federal Reserve
Why the Fed’s first decades were a disaster
Why the Fed gets more power when it underperforms
The problems with the Fed’s response to 2008
What lessons the Fed could have learned (but didn’t) between the Great Financial Crisis and COVID-19
Square did $875 billion in bitcoin revenue in Q2 - up 600% YoY
ADP report: 167,000 jobs added in July (instead of expected 1.2 million)
Our main conversation is with Hedgeye CEO Keith McCullough.
Before building Hedgeye into a “no-excuses provider of real-time investment research and a premier online financial media company,” Keith worked at hedge funds including Carlyle Blue Wave Partners hedge fund, Magnetar Capital, Falconhenge Partners and Dawson Herman Capital Management.
Working with open source software changes the development process, according to this researcher who interviewed hundreds of technologists across projects.
There are people who understand bitcoin yet aren’t obsessively bullish on it. (I know, it’s weird. Like, how?)
Eghbal, a Protocol Labs alum who is familiar with bitcoin, is among them. She described bitcoin as a rare example of a project growing throughout a decade and continuing. Many people measure growth in terms of unique contributors, users or profits. For Eghbal, she said looking at different types of “activity” might offer a better spectrum.
“Measuring activity is maybe a better way to think about project health...some projects also don’t need to be as actively developed as others,” Eghbal said. “I was also looking at things like maintainers’ responsiveness.”
In short, are problems promptly fixed before they affect users? The quality of contributions should be evaluated in addition to the sheer number of contributors. Do the people who use the software get unique value from it when they need it?
Another useful metric, she said, can be “work done,” including “how many pull requests are being merged or how many issues are being closed.”
And, luckily, Eghbal isn’t the only researcher who understands bitcoin without being “active” in the “Bitcoin community.” (To be fair, I use these silly words more than anyone.) Privacy tech legend Claudia Diaz, Nym’s chief technologist, said she believes there could be value in cryptocurrency projects, although that’s not her focus nor passion.
“Cryptocurrency offers an option for the people who use the systems to fund them,” Diaz said. “I’m interested in making systems that make sense and self-sustain because everyone has the right incentives.”
Incentives
There are many different types of value people derive from open source software projects.
Sometimes they use the software, sometimes they use public work to develop their own personal brand. Eghbal said some of the most widely sought after engineers are “building an active fanbase for whatever they are creating.”
She added there are “different types of open source projects” with passionate fandoms, like Rust, plus open source developers have “a lot in common” with other types of online content creators. These public displays can lead to dramatic Twitter feuds and heated rivalries, just like other personality-driven roles like TikTok stars and podcasters.
“I’ve been told so many things are definitely, absolutely true, yet are all conflicting with each other,” Eghbal said of her research. “If I’ve learned anything it’s that developers have opinions.”
This is why Diaz’s token-funded startup, Nym, is developing a privacy layer comparable to Tor, the latter of which she said is heavily reliant on governmentfunding. In contrast, her startup Nym raised $2.5 million in a private token sale in 2019.
“Tor offers different trade-offs,” Diaz said. “We built Nym and the applications on top can be messaging applications or cryptocurrency applications...using the infrastructure to protect their metadata in the sense the network can’t figure out what services you are accessing or what they might be doing with those services.”
Motivations
Diaz considers herself somewhat of an outsider to the open source developer community, like Eghbal. Their motivations are primarily research-oriented, because research is their job.
Nym co-founders like Harry Halpin have more experience in (ideological) open source software development. Even coming from different perspectives, Halpin, Diaz and Eghbal all agreed that collaboration and interdependence are the crux of the open source development process.
“Now instead of relying on a couple of other developers’ code you may now be relying on hundreds of thousands of people’s projects and you don’t even know who these people are,” Eghbal said.
As such, Halpin said Nym works closely with teams contributing to other open source projects, like Rust, Cosmos and Zcash. In addition, his team often works with independent (quasi-celebrity) developers like Amir Taaki. Sometimes people contribute as a hobbyist or a user with specific needs, other times they are paid. There are many reasons why people work on cryptocurrency projects.
“I think it would be great to have an infrastructure that could support privacy in a variety of applications,” Diaz said. “Cryptocurrency offers an option for the people who use the systems to fund them...Privacy technologies have been very difficult to market.”
On the other hand, Eghbal described bitcoin as moving more slowly than some other cryptocurrency projects.
“Trying to prioritize stability is a very different development style rather than allowing people to have lots and lots of features,” Eghbal said, describing Bitcoin as relatively “stable.”
And even if the price of the asset never goes “to the moon,” perhaps continuing to provide reliable software tools can be a metric of success in itself.
Our main discussion: recapping the best interviews of July 2020
Despite a huge variety of perspectives and experiences, one theme shown through in Breakdown conversations in July: the disparity between the stock market and the real economy and a growing unwillingness of people to accept their place in the order.
